[00:00:00] Speaker 04:
Good morning, everyone.

[00:00:03] Speaker 04:
The first argued case this morning is number 19, 1124, General Mills against the United States is Dillon.

[00:00:19] Speaker 00:
Proceed.

[00:00:21] Speaker 00:
Good morning, Your Honors.

[00:00:22] Speaker 00:
Thank you, and may it please the Court.

[00:00:24] Speaker 00:
I am Sheri Dillon on behalf of General Mills, or GM for short.

[00:00:28] Speaker 00:
The trial court held it lacked jurisdiction to hear General Mills' refund claim because it filed its administrative claim too late.

[00:00:38] Speaker 00:
That holding is wrong as a matter of law and should be reversed for two fundamental reasons.

[00:00:44] Speaker 00:
First, the trial court applied the wrongs.

[00:00:46] Speaker 04:
On the theory that it's not computational?

[00:00:51] Speaker 04:
Correct.

[00:00:51] Speaker 04:
You say it should be reversed as a matter of law.

[00:00:54] Speaker 04:
Is that the law?

[00:00:55] Speaker 00:
Well, we believe they applied the wrong statute and that it's not attributable to a partnership item.

[00:01:01] Speaker 00:
That while the regulations do provide that interest may be included in a computational adjustment, our position is that not all computational adjustments are governed by Section 6230C.

[00:01:17] Speaker 00:
Only those that are attributable to partnership items

[00:01:20] Speaker 00:
are governed by 6230C.

[00:01:23] Speaker 00:
Otherwise, computational adjustments can be challenged under 6511A under the general two-year period.

[00:01:30] Speaker 00:
And we believe Congress makes that clear and made it clear three times when it was declaring in various places that only partnership items, only refund claims attributable to partnership items are subject to limited exception for the six-month period under 6230C.

[00:01:49] Speaker 02:
If we're trying to understand the import of 6230C and you want us to understand that statute as having some attributable to a partnership item requirement, but 6230C doesn't say that, shouldn't we just follow the plain language of the statute and that's the best evidence of what was Congress's intent as to the meaning of 6230C?

[00:02:18] Speaker 00:
within 6230 D it explains that 6230 C is applicable to items attributable to partnership that is applicable to refunds attributable to a partnership item 6511 a and is again the general period in 6511 G tells us that when the general period does not apply I guess what I'm wondering is if if there was some kind of attributable to a partnership

[00:02:46] Speaker 02:
item requirement in 6230C, why wouldn't Congress have just written that into 6230C?

[00:02:53] Speaker 00:
I believe they did, and they did so by the... But not quite, right?

[00:02:57] Speaker 02:
It's not actually written into 6230C.

[00:03:01] Speaker 02:
Based on the plain language of 6230C, there's nothing there that gives me any indicia that they were thinking of limiting 6230C's scope to just

[00:03:11] Speaker 02:
I understand you're looking at other evidence outside of 6230C, but just looking at 6230C itself, am I correct?

[00:03:23] Speaker 00:
You are correct that 6230C does not explicitly say it only applies, is only attributable to a partnership item.

[00:03:30] Speaker 00:
However, initially, 6230D6 originally applied both to partnership items and affected items.

[00:03:40] Speaker 00:
Congress wanted to make clear

[00:03:42] Speaker 00:
that affected items were no longer accepted from 6511A.

[00:03:47] Speaker 00:
And in 1997, it explicitly removed that to clarify so that there would be no doubt that 6230C was attributable only to partnership items.

[00:03:57] Speaker 00:
In addition, 6230C1A, that references computational adjustments, has some other limitations.

[00:04:05] Speaker 00:
And those limitations are consistent and show that they are attributable to partnership items.

[00:04:11] Speaker 00:
If 6230 had been open to any computational adjustment and limited not to those, it wouldn't have had those limitations within itself.

[00:04:22] Speaker 00:
So 6230C1A states that, again, it demonstrates that it applies to a subset of computational adjustments by stating that it applies to those that are necessary to ensure that partnership items are treated consistently with a partnership return and individual partner returns.

[00:04:41] Speaker 00:
or to apply to the partner a settlement, final partnership agreement, or court decision related to the partnership return.

[00:04:48] Speaker 00:
So within 6230C1A, it is defining for us what is attributable to or what is not attributable to a partnership item.

[00:04:57] Speaker 00:
And that's consistent with this court's historical reading of 6511G and 6230A, starting with Prochirico and affirmed with Keener.

[00:05:08] Speaker 00:
that attributable to is the standard to look to to see if Section 6230 applies.

[00:05:14] Speaker 00:
And that's telling us that not all claims for refund that relate to an audit of partnership exams are covered by 6230.

[00:05:25] Speaker 00:
You have to look to whether they're attributable to.

[00:05:29] Speaker 00:
And that, again, goes back to the history of TEFRA and the whole purpose.

[00:05:33] Speaker 00:
And that was to allow the service to adjust a partnership return

[00:05:38] Speaker 00:
and apply adjustments to partner's returns to conform the partner's returns to the adjusted partnership return.

[00:05:45] Speaker 00:
And things that affect only a partner that have unique facts that can have no impact on any other partner's liability, those are not attributable to, as this court said in Prochirinko and confirmed when it continued to rely on that in Keener and follow-on cases.

[00:06:08] Speaker 00:
Again, it's our position then that 6230 is not so limited.

[00:06:12] Speaker 00:
Again, in this instance, it was not necessary to apply to the partner a settlement, to apply to the partner a settlement.

[00:06:21] Speaker 00:
Again, the point of 6230 is to make a partner's return consistent with the adjusted partnership return.

[00:06:28] Speaker 00:
And the interest for any one partner, in particular, LCU interest, can have no impact on any other partner.

[00:06:37] Speaker 00:
So the short period for limitations is not needed.

[00:06:40] Speaker 00:
That was put into the code so that should there be any challenges to a partnership exam or partnership adjustments or the computation of those, they could flow them through.

[00:06:52] Speaker 00:
The service would know about them promptly within the six-month period, and it could conform all partners.

[00:06:59] Speaker 00:
For example, let's say the service had made a two-partner partnership, made $100 adjustment,

[00:07:06] Speaker 00:
if you make that hundred dollar adjustment and the service assumed each partner should get 50 of income and Then therefore made a computational adjustment sent out the proper notice which we'll also get to in a moment your honors Then it would and the service assumed it was a 50-50 partnership partner a gets a $50 increase in income Partner a is wait a minute.

[00:07:28] Speaker 00:
We're 40 60 partners.

[00:07:30] Speaker 00:
I shouldn't only have gotten 40 not 50

[00:07:33] Speaker 00:
The purpose of 6230 in the short reason for the short statute so that partner can come into the service and say hey you got it wrong I should have only been allocated 40 not 50 or a 40 60 partnership And it would affect the partner who got 50 and should have gotten 60 and that out that allows again It affects the partnership as a whole when there's an error that affects all partners And that's what is attributable to a partnership item, and that's what's intended in

[00:07:59] Speaker 00:
to fall under 6230C by the erroneous computation of an adjustment necessary to apply to the partner settlement.

[00:08:09] Speaker 00:
That's not what we have here.

[00:08:11] Speaker 00:
LCU interest, as the government agrees, requires a host of partner-level facts.

[00:08:16] Speaker 00:
They've never alleged that the application of LCU interest could impact any other partner.

[00:08:26] Speaker 00:
And then I'd like to turn to our second argument, which is,

[00:08:30] Speaker 00:
Even if the six-month period were to apply, the government never mailed the notice required by Section 6230C.

[00:08:36] Speaker 00:
And so regardless of how your honors decide, whether you decide it's the 6511 statute that applies, it's undisputed that we filed within two years, or if it's the 6230, General Mill's refund claim was timely.

[00:08:54] Speaker 00:
Turning now to my discussion of

[00:08:57] Speaker 00:
The second fundamental reason, again, that the government never mailed 6230C is clear that it requires the government to mail a taxpayer the written notice of computational adjustment.

[00:09:10] Speaker 00:
The government in the trial below was able to persuade the lower court that General Mills had effective notice of the computational adjustment based on information that was gleaned from an assemblage of documents sent to GM even though no one single document provided the notice.

[00:09:28] Speaker 00:
The government has since abandoned that approach.

[00:09:31] Speaker 00:
Instead, it claims to have found the specific letters that constitute 6230C written notices of computational adjustment.

[00:09:40] Speaker 00:
But what the government is pointing to are what are called Section 6631 letters, and they cannot possibly be the proper notice under 6230C.

[00:09:50] Speaker 00:
They make no reference to a limitations period or to 6230, and they give no sign that their jurisdiction

[00:09:56] Speaker 00:
Dictionary significant in any way the letters explained.

[00:10:00] Speaker 00:
Hey, we're being issued as required by section 66 31 section 66 31 an entirely different code provision was enacted in connection with the 1998 IRS restructuring and Reform Act the 66 31 was expanding the taxpayer Bill of Rights for individual taxpayers it has nothing to do with corporate with corporate taxpayers to

[00:10:25] Speaker 00:
It has nothing to do with TEFRA.

[00:10:27] Speaker 00:
Those letters never should have been sent to General Mills at all.

[00:10:30] Speaker 02:
We're talking about the interest computation schedules, right?

[00:10:33] Speaker 00:
Yes, and the letters attached.

[00:10:35] Speaker 02:
And they give you the applicable date for when the interest is going to start clicking, right?

[00:10:39] Speaker 00:
Some of them provide the applicable date.

[00:10:41] Speaker 00:
Some of them tell us it's off.

[00:10:43] Speaker 00:
They also, the schedules themselves, don't separate partnership underpayments from corporate underpayments.

[00:10:50] Speaker 02:
Do they give you the LCU amounts?

[00:10:54] Speaker 00:
Not specific in some places not specific to the underpayments that what is being contested here and that is that the applicable date for the LCU interest That they selected the wrong applicable date for some of our underpayments, but not for others of our underpayments That's what's in dispute in the at the merits level the merits of this case and they don't the LCU schedules do not show which of the

[00:11:24] Speaker 00:
How the interest applies to the various different types of underpayments whether it's a corporate underpayment or a partnership underpayment So they don't provide any any notice of what to challenge and where the wrong amounts are Worse yet the section 66 31 letters that should never have been sent to general mills at all they tell general mills do nothing these are for your information and if any further action is required it will be sent it will be taken by the IRS and

[00:11:55] Speaker 00:
And again, they fail to provide the necessary information the way those schedules are arranged.

[00:12:00] Speaker 00:
They do not show the application of the LCU interest to the underpayments of tax.

[00:12:05] Speaker 02:
General Mills had already paid the tax by this point.

[00:12:08] Speaker 02:
Is that right?

[00:12:09] Speaker 02:
Absolutely.

[00:12:10] Speaker 02:
And also paid the interest.

[00:12:12] Speaker 00:
Yes.

[00:12:12] Speaker 00:
By the time the letters came, again demonstrating that these letters were never intended to provide notice of a computational adjustment,

[00:12:19] Speaker 02:
General mills have been working with the service but they could provide notice in terms of when the six-month period is clicking I Don't believe they can making it.

[00:12:29] Speaker 00:
I believe it notice that claim.

[00:12:30] Speaker 00:
I believe a notice that tells you Do nothing and that it's sent under an entirely different code provision is not sufficient It is miss affirmatively misleading to the taxpayer general mills like any taxpayer any large or even small audit you are constantly working with the IRS and

[00:12:49] Speaker 00:
You know their positions.

[00:12:51] Speaker 00:
They know our positions.

[00:12:53] Speaker 00:
You're discussing them.

[00:12:54] Speaker 00:
You're negotiating them.

[00:12:55] Speaker 00:
LC interest was something, and the applicable date for that interest was an issue of contention for a very long time.

[00:13:02] Speaker 00:
The parties agreed real time.

[00:13:04] Speaker 00:
Eight months after the 6631 letters were erroneously sent to General Mills, General Mills and the IRS entered into a final global settlement agreement.

[00:13:13] Speaker 00:
And that settlement agreement

[00:13:16] Speaker 00:
carved out specifically the opportunity for General Mills to challenge interest because that issue had not been able to be, was not resolved and the parties still disagreed.

[00:13:26] Speaker 00:
And why would any reasonable government official enter into a settlement agreement at that time if it had intended and it had thought that the statute of limitations for challenging that had already expired?

[00:13:40] Speaker 04:
Okay.

[00:13:40] Speaker 04:
Thank you.

[00:13:40] Speaker 04:
Let's hear from the government.

[00:13:54] Speaker 04:
Ms.

[00:13:55] Speaker 01:
Aveda.

[00:13:56] Speaker 01:
Thank you, Your Honors, and may it please the Court, Julie Aveda for the United States.

[00:14:00] Speaker 01:
General Mills had six months to file a refund claim, and they waited two years.

[00:14:04] Speaker 01:
And for that reason, the Court of Federal Claims did not have jurisdiction over this action and appropriately dismissed it.

[00:14:12] Speaker 04:
What is the policy, the philosophy behind this distinction as to partnership items?

[00:14:20] Speaker 01:
Which distinction do you mean, Your Honor?

[00:14:23] Speaker 01:
TEFRA draws several degrees of distinction between partnership items, non-partnership items, and affected items, as well as computational adjustments.

[00:14:33] Speaker 01:
The policy behind drawing those distinctions is not implicated on the question before this court.

[00:14:40] Speaker 01:
All this court needs to determine is whether a taxpayer here received sufficient notice of a computational adjustment

[00:14:52] Speaker 01:
to be bound by the six-month statute of limitations to challenge such a computational adjustment.

[00:14:58] Speaker 01:
The computational adjustment here is the application of large corporate underpayment interest to the determination of a large corporate underpayment.

[00:15:08] Speaker 01:
And that was a settled issue in a partnership proceeding.

[00:15:12] Speaker 01:
So at that level, you're talking about a partnership.

[00:15:16] Speaker 01:
But members of that partnership are subsidiaries of the corporate taxpayers.

[00:15:21] Speaker 01:
So the results of these settlements will flow to these partners and then will be reported on the corporate tax return, which is why large corporate underpayment becomes a side effect of the partnership or a direct effect of the partnership settlement.

[00:15:37] Speaker 01:
More than one partner who is a subsidiary of the GM corporate entity reached a settlement in the partnership proceeding with the IRS as to liability.

[00:15:49] Speaker 01:
not as to interest.

[00:15:51] Speaker 01:
It is clear on the record that the parties were not contemplating settling the interest and explicitly carved it out.

[00:15:57] Speaker 01:
But as the record reflects, and this is a page 604 of the appendix, the final settlement, which was signed in November of 2011, which was actually still within the six-month statute of limitations with respect to the latter tax years, the exception of interest

[00:16:16] Speaker 01:
Calculation of interest was the term used in the settlement document.

[00:16:21] Speaker 01:
That was not included in the settlement.

[00:16:23] Speaker 01:
And that was explicitly not intended to be included in the settlement, because there were obviously still some agreements about that.

[00:16:29] Speaker 01:
But that doesn't change the nature of the relationship between interest and the settlement in the partnership proceeding.

[00:16:38] Speaker 01:
Interest is a function of the settlement in the partnership proceeding.

[00:16:42] Speaker 01:
if you determine that your tax liability is a particular amount and you, as a partner, fall within this large corporate category as a subsidiary of gentlemen's... But how is that justified, the very short limitations period?

[00:17:02] Speaker 01:
The Congress has enacted a six-month limitations period on directly assessed computational adjustments.

[00:17:07] Speaker 04:
We know Congress enacted it.

[00:17:09] Speaker 04:
I asked for the policy, the understanding, in order to determine the intent of Congress.

[00:17:18] Speaker 01:
The six-month limitations period applies only to computational adjustments that are not subject to deficiency procedures.

[00:17:25] Speaker 01:
So you can see that there is an expeditiousness and efficiency policy goal here, because when you are accepting procedures from deficiency, that means that

[00:17:38] Speaker 01:
If the deficiency procedures are not going to apply to a determination, everything happens a whole lot faster.

[00:17:47] Speaker 01:
You need to have answers to questions faster than the deficiency determinations can provide you.

[00:17:53] Speaker 01:
Also, you're taking a computational adjustment, which is not an issue that is meant to have upstream ramifications, as has been discussed.

[00:18:06] Speaker 01:
a partnership item.

[00:18:08] Speaker 01:
Other partners are not going to be affected by this.

[00:18:11] Speaker 01:
But because it's a post-payment remedy when you're in refund suit territory as opposed to deficiency territory.

[00:18:22] Speaker 01:
With the deficiency proceedings, you go to tax court.

[00:18:25] Speaker 01:
And you have a full adjudicative proceeding on your liability before you are obligated to pay a cent.

[00:18:34] Speaker 01:
This is obviously part of a scheme that was put together to streamline and make things as efficient as possible for the benefit of all involved partners and all involved parties, the government as well.

[00:18:49] Speaker 01:
If a partner is out there in the deficiency proceedings trying to figure out what the interest is, and this is holding up all of these other determinations that would flow from how this is going to affect other

[00:19:03] Speaker 01:
aspects of the partner's liability.

[00:19:07] Speaker 01:
That's a drag on the whole system.

[00:19:11] Speaker 01:
That imposes costs on all the parties involved.

[00:19:14] Speaker 01:
And the six-month period here makes clear that the Congress's selection of the six-month period here says everybody needs to have answers.

[00:19:27] Speaker 01:
And everybody needs to have them in time to make all of our

[00:19:31] Speaker 01:
choices here in our planning and in our organization of our partnership finances.

[00:19:41] Speaker 01:
So that's what a six-month period would give you.

[00:19:46] Speaker 01:
The TEFRA statute was enacted long, long, long after the general two-year period of limitations.

[00:19:57] Speaker 01:
And as the court below observed,

[00:20:00] Speaker 01:
Because it is specifically targeted toward these really complex partnership proceedings.

[00:20:07] Speaker 03:
Why don't you move on to whether there was proper notice?

[00:20:09] Speaker 03:
I think we have your argument on this point.

[00:20:12] Speaker 03:
Thank you.

[00:20:13] Speaker 01:
Well, the Court of Federal Claims did not precisely hold that the notice received was cumulative.

[00:20:19] Speaker 01:
It wasn't like you received a letter in 2007 and another in 2010, and then those together were notice or

[00:20:28] Speaker 01:
In 2011, then, that cured some deficiency in the previous notice.

[00:20:33] Speaker 01:
What the court observed is what the taxpayer has observed here in this court, which is that you had an awareness of the proceeding as it was ongoing.

[00:20:44] Speaker 01:
You had information.

[00:20:46] Speaker 01:
You knew their positions.

[00:20:48] Speaker 01:
They knew your positions.

[00:20:51] Speaker 01:
And with that in mind, the notice standard

[00:20:58] Speaker 01:
that the Seventh Circuit has adopted in acute care, that the Fifth Circuit has adopted in Duffy and in Kircher would apply just as well here, which is that if you're on notice, if you know the fact of a deficiency, you've underpaid tax, the amount of the deficiency, how much you've underpaid, or the information necessary for you to determine how much you've underpaid, that is sufficient under the statute.

[00:21:26] Speaker 01:
to trigger the six-month period.

[00:21:28] Speaker 03:
Do you think it was harmless error because they had submission notice, or do you think the secretary actually did mail them something that triggered the day of the start of the six-month period?

[00:21:40] Speaker 01:
We would suggest that there is no error, let alone harmless error.

[00:21:44] Speaker 01:
Any error certainly would be harmless.

[00:21:47] Speaker 01:
The Fifth Circuit, first of all, has held that payment is sufficient.

[00:21:54] Speaker 03:
Unless I'm mistaken, the statute requires that the six-month period is triggered after the day on which the secretary mails notice, right?

[00:22:02] Speaker 03:
Well, that's a date certain.

[00:22:04] Speaker 03:
So what is the date certain?

[00:22:06] Speaker 03:
What day did the secretary mail notice?

[00:22:09] Speaker 03:
Which document is it that you view as the document that he mailed on a particular day that qualified his notice?

[00:22:17] Speaker 01:
June 14, 2011 is the notice date for 2004 through 2006 tax years.

[00:22:24] Speaker 01:
the comprehensive interest schedule was mailed.

[00:22:29] Speaker 01:
April 18, 2011 was the notice date for 2002 and 2003.

[00:22:34] Speaker 01:
That was the date when the comprehensive interest schedules were mailed.

[00:22:38] Speaker 01:
For those periods, April 20 and amended 2002 schedule was mailed, and arguably a statute could have been adjusted to that date as well.

[00:22:47] Speaker 01:
Regardless, and as the court has noted, the taxpayer had already fully paid the obligation by then.

[00:22:54] Speaker 01:
So if you read this as a purely jurisdictional document, as Judge Ten suggested, that clock started running at the latest on June 14, 2011.

[00:23:02] Speaker 01:
So a refund claim would have had to have been filed within 2011, and none was.

[00:23:08] Speaker 01:
Arguably, and we proposed several approaches to this below, the earlier letters that were sent to taxpayer also could have triggered that notice because they met that standard.

[00:23:19] Speaker 01:
But it's absolutely beyond cattle, indisputable, that by June of 2011, the taxpayer had every item necessary to determine what they owed in terms of large corporate underpayment interest, as of what date, at what rate, and

[00:23:35] Speaker 01:
Most importantly, as of the concluding date.

[00:23:38] Speaker 01:
And because we're talking about interest here, that matters.

[00:23:41] Speaker 01:
When you're computing interest over time, interest only runs until you pay the debt.

[00:23:46] Speaker 01:
So you're not going to get a notice of an interest amount due that is a sum certain, because interest will continue to run even after that notice until it's paid.

[00:23:55] Speaker 01:
For jurisdictional purposes, therefore, the interest schedules that were sent in the spring of 2011 were jurisdictionally sufficient.

[00:24:06] Speaker 01:
under 6230C and under the standards embraced by the Fifth Circuit and the Seventh Circuit.

[00:24:16] Speaker 01:
Now, to speak very briefly to the Fifth Circuit cases, they held that payment was evidence that a taxpayer was on sufficient notice, that a taxpayer was in possession of those elements of notice necessary to trigger the running of the statute.

[00:24:31] Speaker 01:
In other words, you know what you owe.

[00:24:32] Speaker 01:
You know as of when.

[00:24:34] Speaker 01:
And you've computed, in that case, the interest that you owe on it.

[00:24:37] Speaker 01:
And that was a different kind of interest, but it was governed by the same reasoning as the interest here.

[00:24:43] Speaker 01:
And in those cases, payment wasn't what triggered the jurisdictional clock, but it was evidence of notice.

[00:24:53] Speaker 01:
And where that notice has been received, as here, the six months clock runs six months later.

[00:25:00] Speaker 01:
It does not depend on the type

[00:25:03] Speaker 01:
of computational adjustment being provided.

[00:25:06] Speaker 01:
And it does not affect the nature of the payment, the interest that is subject to that, is not affected by whether it is the outcome of a settlement or a partnership proceeding.

[00:25:25] Speaker 02:
Can we talk about the three statutes that GM refers to in trying to understand the meaning of 6230C, 6230D6, 7422H, 6511G, where they're saying those provisions provide some indicators of how Congress understood the scope of 6230C?

[00:25:48] Speaker 02:
And so why isn't that right?

[00:25:54] Speaker 01:
As you phrased it, it is.

[00:25:56] Speaker 01:
They do provide insight into the fact that Congress saw the need to.

[00:26:01] Speaker 02:
But the argument is that this is what 6230C means when Congress is describing and referencing 6230C in these other provisions.

[00:26:15] Speaker 01:
And I think, as Your Honor has noted, that's rather inverted.

[00:26:18] Speaker 01:
Because what 6511G and 7422H do

[00:26:23] Speaker 01:
is they carve out and direct you to the 6230C scheme claims that are attributable to partnership items.

[00:26:35] Speaker 01:
Now, as we have submitted here and explained exhaustively on brief, the partnership item status of interest is not material to this determination.

[00:26:45] Speaker 01:
But as to that argument, the fact that you needed to create carve-outs for

[00:26:52] Speaker 01:
items that are attributable to partnership items doesn't define the universe of exceptions from the general 6511A two-year period.

[00:27:03] Speaker 01:
That period does not, it's not the default condition for every partnership-related item that isn't carved out.

[00:27:11] Speaker 01:
And that seems to be the threshold position of the taxpayers here.

[00:27:15] Speaker 01:
We would submit that's incorrect, and the Court of Federal Claims so held.

[00:27:18] Speaker 01:
The universe is not

[00:27:21] Speaker 01:
of claims that fall outside of the two-year statute is not limited to those that Congress has selectively carved out and said these are attributable to partnership items.

[00:27:30] Speaker 02:
Do those provisions do any work in the statute?

[00:27:32] Speaker 01:
They do, but not in this case.

[00:27:34] Speaker 02:
But what work do they do?

[00:27:36] Speaker 02:
The argument on the other side is they're meaningless.

[00:27:38] Speaker 02:
They're superfluous.

[00:27:39] Speaker 02:
And why is that not the case?

[00:27:42] Speaker 01:
Because in a case where the distinction between a partnership item

[00:27:47] Speaker 01:
attributable to a partnership item, an affected item, or a partner-level item as material, they matter.

[00:27:53] Speaker 01:
That distinction is not salient here.

[00:27:56] Speaker 01:
Interest is not different or differently treated here based on whether it is properly characterized as a partnership item or attributable to one or affected by one, because interest is a computational adjustment.

[00:28:10] Speaker 01:
It is definitionally a computational adjustment.

[00:28:13] Speaker 01:
The Treasury regulation defines it as such.

[00:28:16] Speaker 01:
The Court of Federal Claims has so held.

[00:28:18] Speaker 01:
There were several other circuit courts, the Sixth, the Second, the Fourth, and the Embank Tax Court have said that interest is not subject to the deficiency procedures.

[00:28:30] Speaker 01:
So you're not looking at whether it is a partner or partnership level item for purposes of what the tax court has jurisdiction to determine pre-payment.

[00:28:44] Speaker 01:
It's a computational adjustment.

[00:28:46] Speaker 01:
which puts you in the universe of no deficiency procedures unless you fall within these exceptions here.

[00:28:51] Speaker 01:
And as we have shown on brief, the taxpayer here does not.

[00:28:57] Speaker 04:
Okay.

[00:28:57] Speaker 04:
Thank you.

[00:28:58] Speaker 04:
Thank you, Ms.

[00:28:58] Speaker 04:
Avella.

[00:29:08] Speaker 04:
Ms.

[00:29:08] Speaker 04:
Dillon.

[00:29:10] Speaker 04:
Thank you.

[00:29:13] Speaker 00:
I would like to return to a couple of the questions first and your questions about the policy.

[00:29:18] Speaker 00:
And I just wanted to clear up with a TEFRA proceeding.

[00:29:22] Speaker 00:
The TEFRA proceeding can be wrapped up.

[00:29:25] Speaker 00:
No other partners are being held up in determining their tax liability or holding up a partnership as a whole from concluding the partnership proceedings and the TEFRA proceedings with respect to the other partners because of an interest challenge by one partner.

[00:29:41] Speaker 00:
That would be separate and apart, and it doesn't affect the tax liability of any other partner and would have nothing to do with holding up the partnership proceedings.

[00:29:51] Speaker 00:
And again, back to the point of whether the two statutes are intended to be, if 6230 is intended to be a standalone statute, we believe that it can't be.

[00:30:00] Speaker 00:
That would just render the attributable to language as superfluous.

[00:30:05] Speaker 00:
If all computational adjustments were intended to be covered by 6230, it would make no sense.

[00:30:11] Speaker 00:
Congress said it three times, it must have some meaning.

[00:30:14] Speaker 00:
It was trying to reconcile when each of the two statutes would apply.

[00:30:18] Speaker 00:
All three statutes and provisions were enacted at the same time, creating an integrated statutory structure, again, so that we would know when each statute applies and when it doesn't.

[00:30:29] Speaker 00:
And back to notice, that due process certainly requires more than sending the taxpayer a misleading notice.

[00:30:38] Speaker 00:
Section 6230 also requires more.

[00:30:41] Speaker 00:
Section 6230 requires that the secretary mail a written notice of computational adjustment.

[00:30:48] Speaker 00:
And a notice mailed under another code provision telling the taxpayer to do nothing that doesn't provide all of the information to calculate cannot possibly be a notice that's intended to apprise the taxpayer of a loss of right, and that would be the right to a judicial challenge, and the opportunity to object.

[00:31:07] Speaker 00:
which the Supreme Court has held time and time again in a line of cases, most in Jones, Mullane, Mennonite Board of Missions, that you have to, a reasonable government official has to be providing notice that would apprise the taxpayer, again, of a loss of right and the opportunity to object.

[00:31:27] Speaker 00:
Neither of those occurred here.

[00:31:28] Speaker 00:
And payment, again, respectfully, we believe is irrelevant.

[00:31:33] Speaker 00:
What the taxpayer was able to decipher

[00:31:35] Speaker 00:
from muddled messages and what it was able to do to stop the accrual of hot interest.

[00:31:40] Speaker 00:
It's not the taxpayers' actions that matter here.

[00:31:42] Speaker 00:
It's the government's.

[00:31:44] Speaker 00:
The taxpayer is not saying they weren't aware of the amount of money they would owe.

[00:31:48] Speaker 00:
What the taxpayer is saying is, I was never given notice that a jurisdictional period was being triggered.

[00:31:55] Speaker 00:
And that's the notice that was required, and that's the notice that was not provided.

[00:31:59] Speaker 00:
So the taxpayer's payment, the taxpayer's sophistication, those would be completely unworkable

[00:32:06] Speaker 00:
standards for this court or any court to apply taxpayer by taxpayer.

[00:32:10] Speaker 00:
And determining that this type of notice is sufficient would have broader policy implications overall for the tax system.

[00:32:19] Speaker 00:
90% of tax cases are brought by unsophisticated taxpayers.

[00:32:23] Speaker 00:
And if you don't tell them that, hey, something is happening here, you are going to have, and it's going to be when we think a taxpayer has sort of figured it out that that sufficient notice is a very difficult standard to apply.

[00:32:36] Speaker 00:
and would be very difficult for the courts to apply to the unsophisticated taxpayers, as well as sophisticated taxpayers, trying to estimate when a taxpayer would have enough information in order to have sufficient notice to trigger a jurisdictional document, particularly in light where the government's pointing to a document that tells the taxpayer, this is for your information.

[00:32:56] Speaker 00:
Don't do anything.

[00:32:57] Speaker 00:
If anything needs to be done, the IRS will come back to you.

[00:33:00] Speaker 00:
And the IRS was coming back.

[00:33:02] Speaker 00:
And the IRS was continuing to negotiate

[00:33:04] Speaker 00:
and continuing to discuss and debate the applicable date.

[00:33:09] Speaker 00:
And again, that's the reason it was left out of the global settlement agreement.

[00:33:13] Speaker 00:
No one believed, and the IRS did not intend at the time, that the 6631 letters, I think if they did, they certainly wouldn't have said do nothing and therefore your information only.

[00:33:23] Speaker 00:
Again, this seems to be we're getting into a due process problem that awareness and information are not sufficient and the taxpayers

[00:33:32] Speaker 00:
actions don't excuse the government's obligations to provide notice of a potential loss of right or the opportunity to object.

[00:33:41] Speaker 04:
Thank you, Ms.

[00:33:41] Speaker 04:
Dillon.

[00:33:43] Speaker 00:
No more questions?

[00:33:45] Speaker 04:
We have the argument.

[00:33:47] Speaker 04:
Thank you.

[00:33:47] Speaker 04:
Thank you very much.

[00:33:49] Speaker 04:
The case is taken under submission.